Airbnb Confidentially Submits Draft IPO Papers to the SEC

On 19 August 2020, Airbnb said it had confidentially submitted a draft registration statement on Form S-1 to the US Securities and Exchange Commission for a proposed initial public offering of its common stock. The announcement ran to two paragraphs on the company's newsroom.

It told hosts, guests and investors very little else. Airbnb said the number of shares to be offered and the price range had not been determined. It gave no date. The offering, it said, was expected once the SEC had finished its review, and it depended on market and other conditions. CNBC reported that the company disclosed no financial information.

What the notice said and left out

The second paragraph of the notice was legal form. Airbnb said the release was made under Rule 135 of the Securities Act of 1933 and was not an offer to sell securities or a solicitation of an offer to buy them. The notice named no banks and no stock exchange.

The word that mattered was confidentially. Reuters explained that companies can submit an IPO registration to the SEC in confidence, and that if Airbnb went ahead, the filing would become public nearer the listing. Until then the draft stayed out of view. The Associated Press reported that Airbnb had kept the details of the statement to itself.

Reuters added two details from outside the notice. It reported, citing one person familiar with the matter, that Airbnb was aiming to list before the end of 2020 if market conditions allowed. And it named Morgan Stanley and Goldman Sachs as lead advisers on the offering. The AP reported that the timing had not been set.

From a March plan to an August draft

The submission followed a spring in which the plan had been shelved. Bloomberg reported on 12 August 2020, in a report read for this story in the copy published by the Daily Maverick, that chief executive Brian Chesky had originally meant to begin the listing process with the SEC on 31 March. Then, Bloomberg wrote, the pandemic shut borders, stopped flights and brought more than $1 billion in cancellations, and the plans were put on hold.

The cuts followed. In May, Airbnb laid off about 1,900 employees, a quarter of its staff, according to CNBC and the AP. It suspended marketing for the year, Reuters reported. It kept operating on $2 billion in loans, $1 billion of which came from the private equity firms Silver Lake and Sixth Street Partners, the AP reported. Reuters said the $2 billion of debt raised in April put Airbnb's value at $18 billion. In early March, Reuters said, the company had cited an internal valuation of $26 billion.

The Real Deal, reporting on 12 August, recalled how Chesky had described the collapse in a CNBC interview in June 2020. After 12 years of building the business, he said, “we lost almost all of it in a matter of four to six weeks.”

By the second week of August the plan was back. Reuters reported on 12 August that the Wall Street Journal had said a day earlier that Airbnb was close to filing IPO paperwork in confidence with the SEC later in the month.

The numbers, and whose they were

Airbnb's notice carried no financial results. The second-quarter figures in circulation were Bloomberg's, and Bloomberg attributed them to people who did not want to be named discussing private information. According to that report, as published by the Daily Maverick on 12 August 2020:

• Revenue fell to $335 million in the period ending 30 June 2020. Bloomberg said that was down at least 67% from the more than $1 billion the company had reported for the same period of 2019.
• The second-quarter loss before interest, taxes, depreciation and amortization was $400 million.
• June bookings ran 30% below those of June 2019. In May the year-over-year decline had been 70%.

Other signs of recovery were on the record. Airbnb said that on 8 July guests booked more than 1 million nights of future stays, a level not reached since 3 March, the AP reported. The AP cited a report issued the week before by AirDNA, a firm that follows the short-term rental business, which said short-term rental occupancy had come back faster than hotel occupancy.

The recovery was partial. The AP put the number of properties listed by Airbnb at 7 million and reported that demand for them had been hurt at first. Chesky, it reported, had said 2020 revenue would likely come to less than half of the 2019 total.

What investors and other reports said

Reuters quoted two market voices on the filing. Andrea Walne, a general partner at Manhattan Venture Partners and an Airbnb investor, said the company might be thinking that “the lost value they've realized in 2020 could be recouped as a public company” and would show in its stock price. Kathleen Smith, a principal at Renaissance Capital, a provider of institutional research and IPO ETFs, said investors were willing to look past COVID and value companies on what would come after it. “It's a constructive IPO market,” she said.

Other reports recorded the hosts' side. CNBC wrote on the day that many short-term rental hosts had complained that Airbnb payments arrived late or not at all. ShortTermRentalz, a trade paper, wrote that Airbnb's early refund policies and its lack of payments had angered hosts and guests alike.

A week before the notice, the Associated Press had described Airbnb as working to repair its image ahead of the offering, and cited its promise to verify every listing and its tougher stance on parties. On 20 August, the day after the notice, Airbnb announced a global ban on all parties and events at its listings.

What it meant for hosts

Nothing in the notice required a host to do anything. It changed no fee, rule or payout term, and it offered no shares to buy. What it changed was what a host had reason to watch.

• Airbnb's finances stayed private. The draft was confidential, and Reuters said the filing would become public nearer a listing. A host judging the platform's health had Bloomberg's figures from unnamed people and no results from the company.
• Demand was coming back, but not all the way. Bloomberg's report had June bookings still 30% below a year earlier, and the AP reported Chesky as saying 2020 revenue would likely be less than half of 2019's. A host budgeting for the rest of 2020 had that forecast to work with.
• Payouts were a complaint in the reporting. CNBC wrote that many hosts had complained of late or missing payments, which gave a host reason to check each payout against the booking record.
• Tighter rules came with the preparation. The AP tied Airbnb's promise to verify every listing and its tougher stance on parties to the coming offering, and the global party ban followed on 20 August.

As August 2020 ended, hosts knew that Airbnb meant to go public and that one person had told Reuters the target was a listing before the end of the year. Airbnb's notice had named no exchange, date, share count or price.

Sources

1. Airbnb Newsroom, Airbnb Announces Confidential Submission of Draft Registration Statement (19 August 2020).
2. CNBC, Airbnb files confidential IPO paperwork (19 August 2020).
3. Reuters (published by VentureBeat), Airbnb confidentially files for IPO (19 August 2020).
4. Associated Press (published by KSTP 5 Eyewitness News), Airbnb files preliminary paperwork for public stock offering (19 August 2020).
5. Bloomberg (published by Daily Maverick), Airbnb Quarterly Revenue Drops 67%; IPO Still Planned (12 August 2020).
6. Reuters (published by Malay Mail), Airbnb to confidentially file for IPO in August, reports WSJ (12 August 2020).
7. The Real Deal, Airbnb’s Q2 revenue falls by almost 70% (12 August 2020).
8. ShortTermRentalz, Airbnb begins IPO filing process (20 August 2020).
9. Associated Press (published by KTVU FOX 2), In a first, Airbnb takes action against guest for party (12 August 2020).
10. Airbnb Newsroom, Airbnb Announces Global Party Ban (20 August 2020).